Ripple effect: Workers making tofu at a factory in Surabaya. Continued job losses could weaken spending power, production and competitiveness, weighing on social welfare and economic growth. — AFP
JAKARTA: The government has logged another annual increase in layoffs, continuing a four-year trend that points toward a growing informal sector.
Last year, layoffs affected 88,519 workers registered under the Job Loss Insurance (JKP) programme, according to data from the Manpower Ministry.
The figure marks a 13% increase from the previous year and extends an increase in formal-sector layoffs observed since 2022, when 25,114 employees lost their jobs.
The Confederation of Indonesian Trade Unions (KSPI) believes the total number of 2025 layoffs to be much higher, given that the ministry figures do not capture the full picture.
In a press conference on Jan 26, KSPI head Said Iqbal said last year’s layoffs may amount to 100,000 workers, as indicated by increasing claims to the pension programme (JHT) under the Workers Social Security Agency.
He explained that the Manpower Ministry data understated the number of layoffs in the country, as it only covered the JKP programme, which does not include all formal-sector workers.
Meanwhile, the JHT programme cited by the KSPI is mandatory for formal-sector workers, but not for those in the larger informal sector.
Said also noted that the Manpower Ministry only compiled layoff data reported by registered companies, while KSPI’s data is based on reports from the association’s members.
“KSPI received reports directly from the (affected) members. Meanwhile, companies can opt to report to the Manpower Ministry or not. Therefore, data from the labour union is more valid,” he said.
The increase in layoffs last year was driven by a combination of factors, Said explained, pointing first to weakening spending power that had led to lower consumption and hence production.
To address the issue, he urged the government to raise minimum wages.
Next, he said, relaxed import rules under Trade Ministry Regulation No 8/2024 had led to an influx of imported products and triggered mass layoffs in the affected sectors, such as the textile industry.
The regulation has since been replaced by Trade Ministry Regulation No 16/2025, which took effect in August.
Said also mentioned heightened competition among labour-intensive firms at the regional level because of rising costs, such as for rent and taxes, which had prompted relocation to lower-cost regions.
Several Banten-based companies reported to have moved production facilities to regions in Central Java, a province known for its relatively low minimum wage.
The head of the University of Indonesia’s Demographic Institute, I Dewa Gede Karma Wisana, also referred to factory relocation to regions with lower costs as one of the factors behind the layoffs.
“(Another possible factor) is technological change that transforms the structure of labour demand. Hence, some labour groups are no longer needed,” he told The Jakarta Post on Jan 27.
Dewa also blamed external shocks and worsening macroeconomic conditions for job losses, as a less favourable environment forces companies to consider restructuring or belt-tightening by slashing headcount.
The Manpower Ministry’s industrial relations and social security development director general, Indah Anggoro Putri, previously attributed the rising layoffs to geopolitical tensions that had disrupted export and import activities in the country.
“At the beginning of 2025, particularly during the first semester, the global conditions were (affected by) high geopolitical dynamics, which have a clear impact on exports,” she said on Jan 21.
Indah said the government would seek to accelerate measures aimed at tackling unemployment, and specifically layoffs of younger people, such as through the internship programme for fresh graduates as well as through job training.
Dewa, however, warned that the internship programme could prove inefficient in addressing layoffs, as it aims to help those entering the labour market, while layoffs mostly affect experienced workers.
The training programme might help, but the impact would be “insignificant” he said, adding that “the government should ideally focus on the demand side and strengthen labour market information services to improve job matching”.
Alternatively, Dewa suggested the government consider introducing a job retention policy, such as a flexible working scheme or wage subsidies targeted at sectors highly vulnerable to external risks.
Dewa warned that a continued increase in layoffs could result in a widening informal sector and a decline in worker productivity.
“Because of a lack of unemployment benefits, it is unlikely that someone will be fully unemployed, so they will take any available work,” he said.
Mohammad Faisal, executive director of the Centre of Reform on Economics Indonesia, concurred, explaining that growing unemployment from formal-sector layoffs could drive more people to seek jobs in the informal sector.
Rising layoffs have “a bad spiralling down effect”, he told the Post on Jan 29, which could exacerbate already sluggish consumer spending power, lower production levels and even encourage illegal imports, as consumers with limited spending power tend to opt for cheaper alternatives.
“It reduces spending power, lowers overall economic competitiveness, undermines efforts to improve welfare and efforts to accelerate economic growth,” he warned. — The Jakarta Post/ANN
